concepts of mineral correlative rights and waste and home rule

8/12/2019 Concepts of Mineral Correlative Rights and Waste and Home Rule

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New York State

Court of Appeals

In the Matter of MARK S. WALLACH, as CHAPTER 7 TRUSTEE FORNORSE ENERGY CORPORATION, USA

Plaintiff-Appellant,

-against-

TOWN OF DRYDEN et al.,Defendants-Respondents.

Appellate Division, Third Department, Case No. 515227.Tompkins County Index No. 2011-0902.

BRIEF OF PROPOSEDAMICUS CURIAECOMMUNITY ENVIRONMENTAL DEFENSE COUNCIL, INC.

Dated: April 18, 2014 APL-2013-0245

DAVID SLOTTJE, Esq.HELEN SLOTTJE, Esq.Community EnvironmentalDefense Council, Inc.ProposedAmicus CuriaePO Box 898

Ithaca, NY 14851(607) 277-5935(607) 323-0505 (fax)


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CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 500.1(f) of the Rules of Practice for the Court of Appeals

of the State of New York, proposed amicus curiaeCommunity Environmental

Defense Council, Inc. makes the following disclosures: Community

Environmental Defense Council, Inc. is a New York domestic not-for-profit

corporation, and has no parents, subsidiaries or affiliates.

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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

STATEMENT OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INTRODUCTORY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

I. A Brief Description of: The Attributes Of Subsurface Oil And Gas;

The Legal Concepts Courts Have Applied To Questions Regarding

Ownership Of Subsurface Oil And Gas Resources; and The

Nature Of The Interstate Compact To Conserve Oil And Gas,

and The Circumstances That Gave Rise To The Compacts

Formation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

A. The Attributes of Oil and Gas, as Those Substances Exist

Naturally in the Ground... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

B. The Legal Concepts Courts Have Applied To Questions

Regarding Ownership Of Subsurface Oil & Gas

Resources: The Rule of Capture, and the Doctrine of

Correlative Rights.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

C. The Nature Of The Interstate Compact To Conserve Oil

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And Gas, and The Circumstances That Gave Rise To The

Compacts Formation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

II. Explanation Of The Meanings (In the Context of Oil and Gas

Production) Of The Terms Preventing Waste, Protecting

Correlative Rights, and Providing For Greater Ultimate

Recovery; and Argument That A Decision By This Court To

Uphold Local Municipal Authority To Enact Land Use Laws

Prohibiting Gas Drilling WouldNotBe Inconsistent With The

Policies of Preventing Waste, Protecting Correlative Rights,

And Providing For Greater Ultimate Recovery. . . . . . . . . . . . . . . . . 18

A. Prevention Of Waste Explained; and Why A Decision

By This Court To Uphold Local Municipal Authority

To Enact Land Use Laws Prohibiting Gas Drilling

WouldNotBe Inconsistent With The Policy Of

Preventing Waste... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

B. Correlative Rights Explained; and Why A Decision




Protecting Correlative Rights.. . . . . . . . . . . . . . . . . . . . . . . . . 23

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C. Greater Ultimate Recovery Explained; and Why A Decision




Promoting Greater Ultimate Recovery.. . . . . . . . . . . . . . . . . . 33

III. Summary of Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

CONCLUSION, and REQUEST FOR RELIEF. . . . . . . . . . . . . . . . . . . . . . . . . . . 44

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Samson Resources Co. v Corporation Commn, 1985 OK 31, 702 P 2d 19.. . 26, 32

Syverson v North Dakota State Indus. Commn., 111 NW 2d 128 (ND 1961). . . . 35

NEW YORK STATUTES

New York Environmental Conservation Law 23-0901(3). . . . . . . . . . . . . . . . . 29

New York Environmental Conservation Law 23-0101. . . . . . . . . . . . . . . . . . . . 21

New York Environmental Conservation Law, The Interstate Compact

to Conserve Oil & Gas, 23-2101et seq.. . . . . . . . . . . . . . 5, 14, 16, 18, 20

New York Environmental Conservation Law 23-0501(2). . . . . . . . . . . . . . . . . 29

OTHER STATUTES

Ark Code Ann 15-72-102 (15) (c)... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

17 Okl St Ann 53.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

SD Codified Laws 45-9-2(6).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

OTHER AUTHORITIES

Owen L. Anderson & Ernest E. Smith,Exploratory Unitization Under

The 2004 Model Oil And Gas Conservation Act: Leveling The

Playing Field, 24 J Land Resources & Envtl L 277 (2004). . . . . . . . . . . . . 37

Stuart E. Buckley,Petroleum Conservation, 80(Am. Inst. Of Mining and Metallurgical Engineers, 1951).. . . . . . . . . . . . . . 8

William A. Dougherty,New York, 1864-1948,339 in Ch. 22 of

Conservation of Oil & Gas A Legal History (Blakely M. Murphy ed.,

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Section of Mineral Law, American Bar Association, 1949).. . . . . . . . . 15, 17

Northcutt Ely, The Conservation of Oil, 51 Harv L Rev 1209 (1938).. . . . . . . . . 36

W.P.Z. German,Legal History of Conservation of Oil and Gas in Oklahoma,

159, fromLegal History of Conservation of Oil and Gas, A Symposium,

Section of Mineral Law, American Bar Association 1938.. . . . . . . . . . . . . 38

Robert E. Hardwicke, The Rule of Capture and Its Implications

as Applied to Oil and Gas, 13 Tex L Rev 391 (1935).. . . . . . . . . . . . . . 10, 12

Interstate Oil Compact Commn.,A Summary of the Background,

Organization Purposes and Functions of the Interstate Compact

to Conserve Oil and Gas, 1 (1969).. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15

Interstate Oil Compact Commn., Oil and Gas Production(1951).. . . . . . . . . . . . . 9

Eugene Kuntz,A Treatise on the Law of Oil and Gas, Vol. 1 (Matthew Bender rev.

ed.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 26

Eugene Kuntz, The Law of Capture, 10 Okla L Rev 406 (1957).. . . . . . . . . . . . . 10

Richard H. Leach, The Interstate Oil Compact: A Study in Success,

10 Ok L Rev 274 (1957).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 16, 17

Thomas A. Mitchell, The Future of Oil and Gas Conservation:

Past as Prologue, 49 Washburn L J 379, 380 (2009-2010).. . . . . . . . . . . . . 9

David J. Muchow & William A. Mogel,Energy Law and Transactions, Vol 4,

Unit IV Glossary of Energy Terms(2014).. . . . . . . . . . . . . . . . . . . . . . . . . 35

Marshall & Meyers,Legal Planning of Petroleum Production,

41 Yale L J 33 (1931-1932).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15, 16

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David E. Pierce, Carol Rose Comes to the Oil Patch:

Modern Property Analysis Applied to Modern Reservoir Problems,

19 Penn St Envtl L Rev. 241 (2011).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

David E. Pierce,Reconciling State Oil and Gas Conservation Regulationwith the Natural Gas Act, 1989 BYU L Rev 9.. . . . . . . . . . . . . . . . . . 7, 8, 12

Progress Report by the Special Study Committee and the Legal Advisory

Committee on Well Spacing and Allocation of Production of the

Central Committee on Drilling and Production Practice,

Division of Production, American Petroleum Institute

(published by The Committee through private subscription, 1942). . . . . 37

W.L. Summers, Oil and Gas 3:8 (Vol 1, 3d ed.). . . . . . . . . . . . . . . . . . . . . . 13, 25

W.L. Summers, The Modern Theory and Practical Application of Statutes

for the Conservation of Oil and Gas, 8, fromLegal History of Conservation

of Oil and Gas, A Symposium, (Section of Mineral Law, American Bar

Association 1938)... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Howard R. Williams, Conservation of Oil and Gas,

65 Harv L Rev, 1155 (1951-1952)... . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 17

Williams & Meyers et al.,Manual of Oil and Gas Terms(Martin & Kramer eds. 14thed. 2009).. . . . . . . . . . . . . . . . . . . 8, 9, 12, 21, 35

Williams & Meyers, et al., Oil & Gas Law 102 (2013).. . . . . . . . . . . . . . . . . . . . 7

Williams & Meyers, et al., Oil & Gas Law 103 (2013).. . . . . . . . . . . . . . . . . . . . 7

Williams & Meyers, et al.,Oil & Gas Law104 (2013)... . . . . . . . . . . . . . . . . 7, 35

Williams & Meyers, et al., Oil & Gas Law, Index of Terms (2013).. . . . . . . . . . . 35

Williams & Meyers, et al., Oil &Gas Law 203 (2013)... . . . . . . . . . . . . . . . . . . 10

Daniel Yergin, The Prize(Free Press 2009).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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STATEMENT OF INTEREST

Over the last several years, a high percentage of those upstate New York

municipalities that potentially face the prospect of industrial-scale gas mining of

Marcellus shale gas deposits have enacted local land use laws similar in effect to

the Town of Dryden local law that is the subject of the action now before this

Court to prohibit gas mining activities within their municipal borders.

Even more communities would haveenacted such laws, but have refrained from

doing so because pro-gas industry interests have explicitlythreatened to bring suits

against municipal bodies and officials in those communities - in the nature of the

instant action brought against the Town of Dryden if they persisted in attempts

to enact such protective measures.

Community Environmental Defense Council, Inc. (CEDC) is a public interest

law firm, based in upstate New York. One of CEDCs charter purposes is to help

communities, groups, and affected individuals obtain the protection of

environmental and land-use laws and regulations.

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To date, upwards of 200 New York towns have utilized local municipal authority

to enact land use laws prohibiting gas mining activities within their municipal

boundaries, and CEDC has provided legal assistance in the form of drafting or

consultation or both to a very high percentage of them.

CEDC has a keen interest in having this Honorable Court uphold the authority of

New York municipalities to enact land use laws prohibiting gas drilling activities

within their municipal boundaries, in order that the legitimate expectations of

CEDC clients and other municipalities in enacting their existing protective laws

will not be defeated, and in order to make manifest that the threats of suit by pro-

gas industry interests against towns which wish to enact but have not yet enacted

protective laws have no legal legitimacy.

Appellant in its papers asserts that a decision by this Court to uphold local

municipal authority to enact land use laws prohibiting gas drilling would be

inconsistent with the goals of preventing waste, protecting correlative rights,

and providing for greater ultimate recovery that are among the policies which

underlie enactment of the Oil, Gas, and Solution Mining Law.

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All three of these concepts are terms of art within the oil and gas industry.

Despite the fact that Appellant in its papers asserts that these three policies are

the driving force of the Oil, Gas, and Solution Mining Law, making them the

preeminent policy considerations in the preemption analysis, Appellant, within

the combined 132 pages of argument set forth in its Brief and Reply Brief, does

not cite even onejudicial decision from any jurisdiction in support of Appellants

position that notdrilling a well in an oil or gas field that has not been previously

developed constitutes waste, does not cite even onejudicial decision from any

jurisdiction in support of the meaning of the term greater ultimate recovery

proffered by Appellant, and cites only to a single footnotein onejudicial decision

to support Appellants view of the meaning of the term correlative rights.

CEDC has expended hundreds of hours to exhaustively research the history,

development, and application within the oil and gas industry of the terms

preventing waste, protecting correlative rights, and providing for greater

ultimate recovery, and to document the results of that research.

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CEDC seeks amicus curiaestatus in this matter because we respectfully believe

that it would be of assistance to this Court to receive the results of our

comprehensive research: this brief presents law and arguments that would not

appear to have been explored in any of the other briefs submitted in this case. In

other words, we respectfully believe that a review by this Court of the results of

our research could identify law or arguments that might otherwise escape the

Courts consideration.

INTRODUCTORY STATEMENT

This case presents the question of whether municipalities in New York State are

preempted from using local municipal authority to enact land use laws prohibiting

gas drilling activities within their municipal boundaries.

Appellant asserts that a decision by this Court to uphold local municipal authority

to enact land use laws prohibiting gas drilling would be inconsistent with the goals

of preventing waste, protecting correlative rights, and providing for greater

ultimate recovery that are among the policies which underlie enactment of the

Oil, Gas, and Solution Mining Law (OGSML).1

1 The bottom line is that local [drilling bans] make it impossible for the NYSDEC to comply

with, and for New York State to achieve, the objectives of the OGSML and the Interstate

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In fact, a decision by this Court to uphold local municipal authority to enact land

use laws prohibiting gas drilling would notbe inconsistent with the policies of

preventing waste, providing for greater ultimate recovery, and protecting

correlative rights.

Preventing waste, protecting correlative rights, and providing for greater ultimate

recovery are terms of art in the context of the oil and gas industry. These industry-

specific policies are reflected in the Interstate Compact to Conserve Oil and Gas,

which in the words of Appellant was the foundation from which the OGSML

arose.2

Full appreciation of what these terms mean within the context of oil and gas

production requires, first, an understanding of certain related matters: the

Compact of preventing waste, providing for greater ultimate recovery, and protecting correlative

rights.Brief for Appellant Norse Energy Corp. USA, dated October 28, 2013 at 57-58. The

OGSML is codified at Environmental Conservation Law, Article 23.

2 These policies have their basis in the IC, which is the foundation from which the OGSML

arose. These policies are the driving force of the OGSML, making them the preeminent policy

considerations in the preemption analysis. (emphasis added.)Reply Brief of Appellant Mark S.

Wallach, as Chapter 7 Trustee for Norse Energy Corp. USA, dated January 8, 2014 at 46. New

Yorks ratification of the Compact is codified in Environmental Conservation Law, Article 23.

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attributes of oil and gas, as those substances exist naturally in the ground; the legal

concepts courts have applied to questions regarding ownership of subsurface oil

and gas resources; and the nature of the Interstate Compact to Conserve Oil and

Gas itself, and the circumstances that gave rise to the Compacts formation.

These matters are addressed in Part I of this brief.

Part II of this brief explains in detail the meanings in the context of oil and gas

production of the terms preventing waste, protecting correlative rights, and

providing for greater ultimate recovery, and demonstrates that a decision by this

Court to uphold local municipal authority to enact land use laws prohibiting gas

drilling wouldnotbe inconsistent with the policies of preventing waste, providing

for greater ultimate recovery, and protecting correlative rights.

Part III is a Summary of our argument.

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ARGUMENT

I. A Brief Description of: The Attributes Of Subsurface Oil And Gas; TheLegal Concepts Courts Have Applied To Questions Regarding Ownership Of

Subsurface Oil And Gas Resources; and The Nature Of The Interstate

Compact To Conserve Oil And Gas, and The Circumstances That Gave Rise

To The Compacts Formation.

A. The Attributes of Oil and Gas, as Those Substances Exist Naturally in the

Ground.

Nearly all commercial oil and gas production is from some form of sedimentary

rock.3Oil and gas exploration involves searching for reservoirs in the rock where

hydrocarbons have accumulated4and been trapped.5Three fluids, singly or in

combination, are found in reservoir traps: oil, gas, and water, usually salt water.6A

conventional reservoir, in its natural state, is under pressure. When an opening is

made in the reservoir, such as by drilling a well bore into it, a low-pressure zone is

3Williams & Meyers, et al., Oil & Gas Law 102 (2013).

4Id. 103.

5The rock structure in which the hydrocarbons have accumulated must be covered by

impermeable rock that serves as a trap. Without such a trapping mechanism, the oil and gas

would through time migrate to the surface of the earth and dissipate. Therefore, an oil and gas

reservoir consists of a body of porous and permeable rock, overlain by impermeable rock

material, which contains oil, gas, or both. David E. Pierce,Reconciling State Oil and Gas

Conservation Regulation with the Natural Gas Act: New Statutory Revelations, 1989 BYU L

Rev 9, 12.

6Williams & Meyers, O&G Law104.

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created near the well bore. Material within the reservoir will then move from the

higher pressure zones of the reservoir, through the permeable rock, toward the

well bore.

7

Within the oil and gas industry, the term drainage refers to the migration of oil

or gas in a reservoir due to a pressure reduction caused by production from wells

bottomed in the reservoir.8

A reservoir or pool is an underground accumulation of [hydrocarbons] in a single

and separate natural reservoir characterized by a single pressure system so that

production [ ] from one part of the pool affects the reservoir pressure throughout

its extent. A pool is so bounded by geologic barriers that it is effectively separated

from other pools that may be present.9

The naturally occurring force within a conventional reservoir that propels the oil

or gas to the well bore is referred to as thereservoir energy. Four sources of

7

Pierce, 1989 BYU L Rev at 12.8Williams & Meyers et al.,Manual of Oil and Gas Terms(Martin & Kramer eds. 14thed. 2009);

definition of drainage.

9Stuart E. Buckley,Petroleum Conservation, 80 (Am. Inst. Of Mining and Metallurgical

Engineers, 1951).

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natural energy may be present in a reservoir: (1) gas expansion, of either gas in

solution in oil or of a natural gas cap; (2) water encroachment; (3) expansion of

reservoir oil; and (4) gravity. The first three result from the reduction of pressure

by opening a well to the surface, and of the four the first two are the most

important.10Either gas expansion or water encroachment provides the principal

energy for most petroleum reservoirs.11

B. The Legal Concepts Courts Have Applied To Questions Regarding

Ownership Of Subsurface Oil & Gas Resources: The Rule of Capture, and

the Doctrine of Correlative Rights.

The modern age of oil and gas production originated with the Drake well in

western Pennsylvania in 1859.12Believing that subsurface oil and gas were

migratory in nature and that the belowground movement of these substances

paid no heed to above-ground property boundaries courts in producing states

employed a number of different legal theories as they attempted to grapple with

how to describe or classify the interest of the landowner in the oil and gas which

10Manual of O&G Terms, definition of reservoir energy.

11Interstate Oil Compact Commn., Oil and Gas Production, 36 (1951).

12Thomas A. Mitchell, The Future of Oil and Gas Conservation: Past as Prologue, 49

Washburn L J 379, 380 (2009-2010).

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might be produced from a well located on his land.13

Different courts took different routes to get there, but eventually all of the courts

arrived at the conclusion that ownership of subsurface oil and gas would be

subject to the Rule of Capture.14

Application of the Rule of Capture15to oil and gas meant that the owner of a tract

of land overlaying a resource pool (a) had the right to drill as many wells and at

such locations on his own property as he pleased in an to attempt to recover

subsurface hydrocarbons from that pool, and (b) that in so doing he would acquire

good title to any and all oil and gas produced from those wells, notwithstanding

that some or even most of the oil or gas produced might have migrated (or been

drained) from that portion of the same pool which underlays his neighbors

13Williams & Meyers, O&G Law 203.

14Robert E. Hardwicke, The Rule of Capture and Its Implications as Applied to Oil and Gas, 13

Tex L Rev 391, 393 (1935).

15 According to the law of capture, the landowner may capture oil and gas by operations on his

land. He owns the captured substance absolutely once it is reduced to dominion and control

although the substance [had been located within a pressure-connected common pool and]

formerly was deposited under anothers land and was induced to migrate to the point of capture

by such operations. Eugene Kuntz, The Law of Capture, 10 Okla L Rev 406 (1957).

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land.16

The Rule of Capture made it economically imperative that each property owner

drill his land and produce at as a rapid a pace as possible, because otherwise his

land would be drained of oil and gas by wells on adjacent properties.17

In that event, the owner of the adjacent or other property from which the first

landowners wells were pulling oil, gas, or both was legally prohibited from

protecting himself, except by drilling his ownwells, in an attempt to stanch out-

migration from his portion of the common source of supply, and hopefully induce

migration to himof subsurface product that had otherwise been located under the

property of the first landowner.18

16 It, consequently, was held at a very early day in the history of the [industry] that a man could

not be restrained by his abutting neighbor from boring for [hydrocarbons] upon his own

premises, although he located his well within a few feet of the line and would necessarily drain

the [hydrocarbons] from his neighbors land, if any existed therein. Wagner v Mallory, 169 NY

501, 505 (1902).

17Howard R. Williams, Conservation of Oil and Gas, 65 Harv L Rev, 1155, 1159 (1951-1952).

18 every landowner or his lessee may locate his wells wherever he pleases, regardless of the

interests of others. He may distribute them over the whole farm or locate them on only one part

of it. He may crowd the adjoining farms so as to enable him to draw the oil and gas from them.

What then can the neighbor do? Nothing; only go and do likewise. Bernard v Monongahela

Natural Gas Co., 216 Pa 362, 65 A 801, 802 (1907).

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Within the oil and gas industry, the term offset well refers to a well drilled on

one tract of land to prevent the drainage of oil or gas to an adjoining tract of land,

on which a well is being drilled or is already in production.

19

The inevitable (albeit in hindsight) effect of applying the Rule of Capture to oil

and gas was profligate drilling: a race to drill as many wells as possible to extract

oil and gas as fast as possible. The reward would be title to the oil and gas beneath

ones property, and, one hoped, a substantial portion of the oil and gas [within the

common source of supply otherwise located] beneath neighboring properties.20

To ameliorate the less salutary effects21of the Rule of Capture, the courts applied

the doctrine of correlative rights to the situation where two or more different

parties owned separate properties, each of which lay over portions of a subsurface,

pressure-connected, common source of supply of hydrocarbons. Rights in oil and

19Manual of O&G Terms, definition of offset well.

20Pierce, 1989 BYU L Rev at 14.

21This rule of law produced results that were unfair to many landowners and development

practices that were uneconomical or wasteful for all. Cowling v Board of Oil, Gas and Min.,

Dept. of Natural Resources for State of Utah, 830 P2d 220, 224 (Utah 1991); and

The rule of capture is frequently and scornfully called the law of piracy or the law of the

jungle []. Hardwicke, 13 Tex L Rev at 32.

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gas are relative because no single owner within a common source of supply can

take action on their property without potentially impacting the rights of other

owners within the common source of supply.

22

The concept of correlative rights is in essence a limitation of the Rule of Capture.23

The doctrine of correlative rights is shorthand for stating that where two or more

different parties own separate properties, each of which overlays portions of a

subsurface, pressure-connected, common source of supply of hydrocarbons, each

owner of an interest in the common source of supply of oil and gas has a legal

privilege, as against the other ownersto take oil and gas by legal operations,

limited by duties to the other owners (b) not to injure the source of supply, and (c)

not to take an undue proportion of the oil and gas. (emphasis added.)24

C. The Nature Of The Interstate Compact To Conserve Oil And Gas, and The

Circumstances That Gave Rise To The Compacts Formation.

221 Eugene Kuntz,A Treatise on the Law of Oil and Gas 4.3 (Matthew Bender rev. ed.).

23Although correlative rights have been an important and recognized element of property in oil

and gas for over 100 years, they have been viewed primarily as a limitationon an owners oil and

gas rights: a negativeright as opposed to an affirmativeright. (emphasis in original.) David E.

Pierce, Carol Rose Comes to the Oil Patch: Modern Property Analysis Applied to Modern

Reservoir Problems, 19 Penn St Envtl L Rev. 241, 246 (2011).

24 1W.L. Summers, Oil and Gas 3:8 (3d ed.); and see Part II. B. of this brief, infra.

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The concepts of preventing waste, protecting correlative rights, and providing for

greater ultimate recovery have their basis in the Interstate Compact [to Conserve

Oil and Gas], which is the foundation from which the OGSML arose.

25

The Interstate Compact to Conserve Oil and Gas (the IOG Compact) was formed

in reaction to a profound crisis in the oil and gas industry caused by

overproduction.26

By 1931, the industry found itself overburdened with success in finding more

[product] than could be currently used, transported, or consumed.27The methods

of competitive exploitation then prevalent in the industry quickly transformed

potential into actual supplies, with little regard to market demands. The physical

waste and the economic losses from heedless competition were appalling.28It []

25Appellants Reply Briefat 46.

26The IOG Compact was a direct result of the glut in [resource] production which followed the

development and discovery of the vast new oil fields in Texas and Oklahoma between 1925 and

1930. Richard H. Leach, The Interstate Oil Compact: A Study in Success,10 Ok L Rev 274(1957).

27Interstate Oil Compact Commn.,A Summary of the Background, Organization Purposes and

Functions of the Interstate Compact to Conserve Oil and Gas, 1 (1969).

28Marshall & Meyers,Legal Planning of Petroleum Production, 41 Yale L J 33, 35 (1931-1932).

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became imperative that the financial losses of overproduction be checked and that

the prodigal physical wastes be eliminated.29

New York was not immune from the problem of overproduction and low prices:

Lack of proper legislation caused unlimited production and early exhaustion of

many natural gas pools, true particularly with the development in the 1930s of the

Oriskany sands in the southern tier counties. There were no restrictions upon any

producer as to practices, quantities, or manner of production. Consequently, the

law of capture applied []30

It became apparent that the problem of overproduction was an interstate one which

could not be solved by each state acting individually.31

Things were grave indeed: the governors of both Oklahoma and Texas called out

their state militias to close down production.32The industry was desperate to find

29Id. at 33.

30

William A. Dougherty,New York, 1864-1948,339 in Ch. 22 of Conservation of Oil & Gas ALegal History (Blakely M. Murphy ed., Section of Mineral Law, American Bar Association,

1949).

31Summary of the Background of the Interstate Compact,1.

32Daniel Yergin, The Prize, at 233-234 (Free Press 2009).

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some mechanism other than the rifle barrels of National Guardsmen - to

constrain production. Some industry representatives were so despairing that they

attempted to have the federal government impose production controls. For

example, in 1929 the American Petroleum Institute applied to the federal

government for approval of curtailment of production, but was informed by the

Secretary of the Interior that no legal authority at the federal level could be found

to approve an agreement for the restriction of output.33

Eventually the mechanism of an interstate compact was settled upon as the vehicle

through which curtailment of production could be achieved. In 1935 approval of

such a compact was passed by Congress and signed by the president, and that year

the IOG Compact came into existence; the states approving the Compact in 1935

were Colorado, Illinois, Kansas, New Mexico, Oklahoma, and Texas.34New York

approved the Compact in 1941.35

The IOG Compact is administered by the Interstate Oil and Gas Compact

Commission (the IOG Commission). The IOG Commission has no compulsive33Marshall & Meyers,Legal Planning, 41 Yale L J at 34, n 4.

34Leach, Study in Success, 10 Ok L Rev at 275.

35L 1941, ch 501.

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power.36The Commission exercises no function which attempts to tell anybody,

any individual or any state what they can or cannot do. It is an agency created for

the purpose of attempting to get the states to agree among themselves upon a

conservation program that will conserve natural resources by the prevention of

physical waste. [] It has no power.37

No instrument of force was created by the IOG Compact; the idea of a stronger

regulatory body was rejected, and it was agreed that none of the States should be

required to surrender any of their rightful powers over conservation, even to an

interstate body. Instead, the compacting states merely agreed that each in its own

ways [] would work for conservation of oil and gas and the prevention of

physical waste.38No state can be called before the courts for breach of promise

under the Compact.39

By its express terms, the IOG Compact has one and only one purpose: to

36

Williams, Conservation, 65 Harv L Rev at 1162.

37Dougherty, Conservation of Oil & Gasat 577, n 13.

38Leach, Study in Success, 20 Ok L Rev at 276.

39Dougherty, Conservation of Oil & Gasat 574.

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conserve oil and gas by prevention of physical waste thereof from any cause.

(emphasis added.)40

II. Explanation Of The Meanings (In the Context of Oil and Gas Production)

Of The Terms Preventing Waste, Protecting Correlative Rights, and

Providing For Greater Ultimate Recovery; and Argument That A Decision

By This Court To Uphold Local Municipal Authority To Enact Land Use

Laws Prohibiting Gas Drilling WouldNotBe Inconsistent With The Policies

of Preventing Waste, Protecting Correlative Rights, And Providing For

Greater Ultimate Recovery.

The text of Appellants Brief runs to 66 pages, and the text of Appellants Reply

Brief is also 66 pages. It is Appellants position that the policies of preventing

waste, protecting correlative rights, and providing for greater ultimate recovery

are the driving force of the OGSML, making them the preeminent policy

considerations in the preemption analysis.41It is significant, then, that within its

132 pages of argument, Appellant does not cite even onejudicial decision from

any jurisdiction in support of Appellants position that notdrilling a well in an oil

or gas field that has not been previously developed constitutes waste, does not

cite even onejudicial decision from any jurisdiction in support of the meaning of

the term greater ultimate recovery proffered by Appellant, and cites only to a

40New York Environmental Conservation Law 23-2101, Title II.

41Appellants Reply Briefat 46.

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single footnote in onejudicial decision to support Appellants view of the meaning

of the term correlative rights.

There in fact exists quite a developed body of law and academic commentary with

respect to the concepts of waste, correlative rights, and greater ultimate recovery

within the context of oil and gas production activities, and the remainder of this

Part II describes and summarizes that body of law and commentary.

A. Prevention Of Waste Explained; and Why A Decision By This Court To

Uphold Local Municipal Authority To Enact Land Use Laws Prohibiting Gas

Drilling WouldNotBe Inconsistent With The Policy Of Preventing Waste.

Appellant asserts that upholding local municipal authority to enact land use laws

prohibiting gas drilling would be inconsistent with the policy of preventing

waste.42

Appellant does not offer even a single citation of authority for its position that not

drilling a well in an oil or gas field that has not been previously developed

42E.g., id. at 46-47.

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constitutes waste, but that is no surprise.

The fact is that there exists noauthority for the position that notdrilling a well in

an oil or gas field that has not been previously developed consititutes waste, not

in judicial decisions, not in statutes, and most certainly not in any part of the

history of enactment of the IOG Compact.

A description of the circumstances leading up to creation of the IOG Compact is

set forth at Part I-C of this brief,supra. The suggestion that those circumstances in

any manner support Appellants thesis that notdrilling a well in an oil or gas field

that has not been previously developed constitutes waste is beyond our ken. The

history of the IOG Compact is straightforward, and in every respect that history

involved an attempt to find a mechanism to curtail production(as well as finding

a mechanism to support the notion that where production doestake place, it ought

to take place efficiently).

There is simply no aspect of the history or purpose of the IOG Compact that

supports Appellants contention that notdrilling a well in an oil or gas field that

has not been previously developed constitutes waste.

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With respect to statutory authority, New Yorks definition of waste for purposes

of the Environmental Conservation Law is set forth at item 20 of ECL 23-0101.

That definition contains five elements, the first of which is physical waste, as that

term is generally understood in the oil and gas industry. The oil and gas industry

does notunderstand physical waste to involve a determination notto drill a well in

an oil or gas field that has not been previously developed.43

The next two elements of the statutory definition of waste respectively involve the

inefficient, excessive or improper use of, or the unnecessary dissipation of

reservoir energy and the inefficient or otherwise improper locating, spacing

operating or producing [] of wells. These two elements of the definition

involve requirements applicable only to circumstances where drilling operations

have taken, are taking, or will take place; they have no application to

circumstances where drilling has not, is not, or cannot take place.44

43Physical waste means operational losses in theproductionof oil and gas. There are two main

divisions of loss of oil and gas, namely, surface loss and underground loss. Surface loss of oil is

due principally to evaporation and surface loss of gas is due principally to [flaring] or blowing

into the atmosphere. Underground loss is due to failure to recover the maximum quantity which

theoretically could be produced, as by dissipation of reservoir pressure.(emphasis added.)

Manual of O&G Terms; definition of physical waste.

44Accord,Ivey v Phillips Petroleum Co., F Supp 811 (SD Tex 1941).Iveyinvolved, inter alia, anaction for damages for waste brought by a landowner against a third party volunteer who had

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The final two elements of the statutory definition inefficient storage of oil or gas,

and improper flaring of gas from a well likewise have no application to a

situation where drilling has not, is not, and cannot take place.

With respect to case law, we have reviewed literally hundreds of judicial decisions

regarding waste, from all across the country, and have found none to support

Appellants contention that notdrilling a well in an oil or gas field that has not

been previously developed constitutes waste.45

There is absolutely no support for Appellants position that notdrilling a well in

an oil or gas field that has not been previously developed somehow constitutes

waste.

entered onto the landowners property in an unsuccessful attempt to plug a well that had blown

out and caught fire. The court refused to apply the statutory prohibition against waste to the

volunteer, reasoning that because the waste statute made unlawful the production, storage or

transportation of oil or gas in such a manner as to constitute waste, it applied onlyto persons

engaged indrilling, producing and transportation operations.

45Of course, waste can be found to exist in the context of drilling too many wellswithin a field or

pool, or of drilling a well improperly, or even of notdrilling additionalwells in aproducingfield

or pool (such as, for example, an offset well to stanch or counter balance drainage). But as stated

above, we have been unable to find even one case, from any American jurisdiction, that supports

Appellants contention that notdrilling a well in an oil or gas field that has not been previously

developed constitutes waste.

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Accordingly, a decision by this Court to uphold local municipal authority to enact

land use laws prohibiting gas drilling would notbe inconsistent with the policy of

preventing waste.

B. Correlative Rights Explained; and Why A Decision By This Court To

Uphold Local Municipal Authority To Enact Land Use Laws Prohibiting Gas

Drilling WouldNotBe Inconsistent With The Policy Of Protecting

Correlative Rights.


prohibiting gas drilling would be inconsistent with the policy of protecting

correlative rights. In that regard, Appellant asserts that upholding municipal

authority to prohibit drilling would result in the obliteration of correlative

rights.46


use laws prohibiting gas drilling would notbe inconsistent with the policy that

correlative rights be protected.

Appellant is apparently of the opinion that the concept of correlative rights

somehow involves or perhaps even requires the drilling of as many wells as

46E.g., Appellants Brief at 29.

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possible in as many communities as possible within as many New York

municipalities as possible. In this regard, it would appear that Appellant

misapprehends what correlative rights are in the context of oil and gas.

Application of the concept of correlative rights to subsurface oil and gas came

about in reaction to and as an attempt to mitigate certain undesirable consequences

that resulted from application of the Rule of Capture to oil and gas.47Indeed, the

concept of correlative rights in the context of oil and gas is often described as a

limitation on the Rule of Capture,48and both statutory49and judicial50imposition

of restrictionsand limitationson productionof oil and gas in the name of

protecting correlative rights are common.51

47See Part I. B. of this brief,supra.

48Id.at n 23.

49E.g.Arkansas statutorily ties correlative rights to disproportionate withdrawals: Abuse of the

correlative rights and opportunities of each owner of oil and gas in a common reservoir due to

nonuniform, disproportionate, and unratable withdrawals Ark Code Ann 15-72-102 (15)(c).

50E.g., Chevron Oil Co. v Gas Conservation Commn, 435 P2d 781 (Mont 1967), where the

Supreme Court of Montana held that the state (regulatory) Gas Commission had authority to

limit production rate or otherwise control quantity of oil and gas produced [ ] to protect

correlative rights (emphasis added), notwithstanding that the Gas Commission itself had taken

the position that it had no such authority absent a finding of waste.

51New Yorks statutory and regulatory scheme limitsthe number of wells that can be drilled [ ]

thus insuring maximum recovery. A necessary consequence of limiting the number of wells is

that some people will be prevented from drilling to recover the oil or gas beneath their property.

To avoid any inequity, New York has modified the law of capture and adopted the doctrine of

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The term correlative rights is merely a simple way of stating that the privileges of

each landowner in a common source of supply of oil and gas are limited by duties

to other landowners not to injure the oil and gas reservoir, or to take an undue

proportion of the oil and gas obtainable therefrom.52

The term correlative rights in oil and gas law describes a bundle of legal rights

and duties. It means that (a) each owner of an interest in a common source of

supply of oil and gas has a legal privilege, as against the other owners, to take oil

and gas by legal operations, limited by duties to the other owners (b) not to injure

the source of supply, and (c) not to take an undue proportion of the oil and gas.

(emphasis added.)53

The Supreme Court of Oklahoma has defined correlative rights to be a

correlative rights, whereby each landowner is entitled to be compensated for theproductionof

the oil or gas located in the pool beneath his or her property regardless of the location of the well

that effectsits removal. (emphasis added.) Western Land Services Inc. v Department of

Environmental Conservation of State of New York, 26 AD 3d 15, 17 (Third Dept. 2005).52W.L. Summers, The Modern Theory and Practical Application of Statutes for the

Conservation of Oil and Gas, 8, fromLegal History of Conservation of Oil and Gas, A

Symposium, (Section of Mineral Law, American Bar Association 1938).

531 W. L. Summers, Oil and Gas, 3:8 (3d ed.).

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convenient method of indicating that each owner of land in a common source of

supply of oil and gas has legal privileges as against other owners of land therein

to take oil and gas therefrom by lawfuloperations conducted on his own land,

limited, however, by duties to other owners not to injure the source of supply and

by duties not to take an undue proportion of the oil and gas. (emphasis added).54

From this it can be seen that correlative rights are those rights which one owner

possesses in a common source of supply in relationto those rights possessed by

other owners in the same common source of supply. (emphasis added.)55

The term correlative rights does not conceal some mysterious and bewildering

concept. It is a simple doctrine that owners of rights in a common source of supply

may not inflict loss upon one another by conduct which is considered to be

socially unacceptable.56

54

Samson Resources Co. v Corporation Commn, 1985 OK 31, 702 P 2d 19, 22.55Id.

561 Kuntz,Law of Oil and Gas 4.3. [N.B. The name of the chapter in which the Kuntz editors

describe correlative rights is Chapter 4 Rights of Owners of Oil and GasAmong Themselves

(emphasis added).]

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Correlative rights do not exist in a vacuum57, and it is not the case that every

member of the public, or even every member of the public who might prefer that a

local legislature not enact a municipal-level drilling ban, ipso factopossesses

correlative rights to be protected.

In the context of oil and gas, correlative rights exist even potentially only in

circumstances where separate owners own separate properties, each of which

overlies a pressure-connected hydrocarbon reservoir; even then, correlative

rights do not apply to third parties, and apply onlyto the relationship between or

among the owners of the separate properties which overlay the pool in question.58

57Correlative rights only exist, even potentially, in the context where separate parties separately

own interests in a common source of supply of hydrocarbons. Some correlative rights cases speak

in terms of allowing a landowner the opportunity to produce his just and equitable share of oil

and gas. All of those cases involve (only) affording a landowner who owns an interest in a

common source of supply (only) the same opportunity, if any, as exists in favor of the other

landowners in the common source of supply. If, for example, there are a total of (say) 100

landowners having interests in the common source of supply, and for whatever legitimate reason

noneof them may drill for example, perhaps the common source of supply is in the New York

City watershed or some other place off limits to drilling because the risks of allowing drilling in

that area are too great then noneof them may be said to have lost correlative rights. The

opportunity to produce simply means that all landowners within the common source of supply

have no greater or lesser opportunity to produce than the others.

58The term correlative rights embraces the relativerights of owners in a common source of

supply to take oil or gas by legal operations limited by duties to the other owners (1) not to injure

the common source of supply and (2) not to take an undue proportion of the oil and gas.

(emphasis added.)Kingwood Oil Co. v Hall-Jones Oil Corp., 1964 OK 231, 396 P2d 510, 512.

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Imagine four identically shaped and sized rectangular properties, situated in a row,

as in a city block. The properties are owned by A, B, C, and D,

respectively. Next imagine that a single kidney-shaped pool of hydrocarbons

underlies the property of both A and B (but does not extend under the property of

either C or D), that a separate59pool of hydrocarbons underlies the property of C,

and that no pool underlies the property of D.

Under these circumstances, no correlative rights exist (even potentially) in favor

of D as to the pool under Cs property, or as to the pool that straddles the

properties respectively owned by A and B. Similarly, no correlative rights exist

(even potentially) in favor of C as to the pool that straddles the properties

respectively owned by A and B, because the pool under Cs property and the other

pool are not a common source of supply. Furthermore, no correlative rights exist

(even potentially) in favor of any third party member of the general public to

either of the aforementioned pools. The only place that correlative rights come

into play even potentially is in the context of one or both of A and B engaging in

activities to extract product from the common pool that lies beneath their property,

59Separate in the sense that there is no pressure connection between the pool under Cs

property and the pool that lies under the property of A and B, and thus excess drilling (say) on

Cs property can not drain product from the pool under the property of A and B, or result in any

diminution of reservoir pressure from the pool under the property of A and B.

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and in that event correlative rights speak only to the relativerights and duties of

A and B as between themselveswith regard to the common source of supply.

Correlative rights do not create a right to drill - and do not create an obligation to

drill in an oil or gas field that has never been developed.

Imagine the situation of A and B above, but with the following refinements: (i) A

would like to use his property for gas mining; (ii) by itself, As property is too

small for A to receive a drilling permit from the NYS DEC; (iii) at the present

time, B does not want to use his property for gas mining, perhaps because he

believes he can get a better price for the gas sometime in the future; and (iv) the

size of As property is such that A does not qualify to be able to force B to

dedicate hisproperty to drilling via the mechanism of compulsory integration.60

In the situation described in the preceding paragraph, A cannot force B to make

60Environmental Conservation Law 23-0901(3) is the compulsory integration statute, and

Environmental Conservation Law 23-0501(2) sets forth requirements regarding establishment

of permitted drilling units. Under those statutes, an owners or owners [or those, such as a lessee

under a gas lease, claiming through the owner(s)] controlling at least 60% of a drilling unit can

force (hence the term compulsory) the owners of the remaining 40% of the drilling unit to make

the latters property(ies) available to be used for drilling. NYS DEC anticipates that drilling units

in the context of attempts to extract gas from the Marcellus formation will generally be 640 acres

each. Thus an owner (or lessee) who controls 384 acres (being 60% of 640) can force owners of

the remaining 40% of the drilling unit (256 acres) to allow drilling to take place under their land.

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his property available for drilling, under color of a correlative rights claim or

otherwise. And Bs election not to dedicate his property to gas mining is in no

manner, shape, or form somehow a violation of As correlative rights. In fact, in

this situation neither A nor B hasany correlative rights, because correlative rights

as a concept exist onlyin the context of extraction operations in or affecting a

common pool.

All judicially recognized and statutory measures to protect correlative rights fit

within one or both of only two categories. The first category can be described as

involving requirements prohibiting or intended to prevent damageto a pressure-

connected, common source of hydrocarbons by one ownerof an interest in the

common source of supply to the detriment of either other owners of an interest in

the common source of supply, or the public. An example of a measure falling into

this category would be a regulatory requirement that prohibits utilization of

drilling practices of a type that inefficiently or wastefully dissipates reservoir

energy.

The second category of judicially recognized measures to protect correlative rights

involves requirements intended, in the context of a developed oil or gas field, to

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assure that each owner of an interest in the common source of supply obtains (or

receives an opportunity to receive) her just and equitable share of production (or

the value of such production) from the common source of supply.

61

This second category of measures to protect correlative rights may be further

divided into two sub-categories: (i) restrictions intended to prevent one owner

from obtaining the benefit of more than her fair share (vis--vis the other owners)

of the common source of supply;62and (ii) requirements designed to ensure, in the

context of regulatory action the effect of which is to restrict production (whether

to prevent waste, or otherwise), that the effect of the restrictionon on-going

production is borne in equitable proportion between or among the respective

owners of interests in the common source of supply.63

61E.g., South Dakotas statutory definition of this term: Just and equitable share shall mean, as

to each person, that part of the authorized productionfrom the pool that is substantially in the

proportion that the amount of recoverable oil or gas in the developed areaof his tract or tracts in

the pool bears to the recoverable oil or gas or both in the total of the developed areasin the

pool. (emphasis added.) SD Codified Laws 45-9-2(6).

62An example of a measure falling within this category would be a regulatory restriction

regarding well location that was intended to prevent drainage by one person of subsurface

hydrocarbons that would otherwise remain (in the same common pool) under property owned by

a different person.

63An example of a measure falling within this category would be the not uncommon situation

where a regulatory agency restrictsthe amount of legal or allowable production to avoid waste

and protect correlative rights from a particular well or from all wells within a particular pool,

and then allocates or prorates the amount of allowed production (allowables) between or among

the separate parties owning interests in the common source of supply as to which production has

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The concept of correlative rights does not in any manner require the drilling of as

many wells as possible in as many communities as possible within as many New

York municipalities as possible, nor may it accurately be said that correlative

rights are somehow not protected unless the industryisallowed to drill as many

wells as possible in as many communities as possible within as many New York

municipalities as possible.

The term correlative rights simply embodies the concept that each owner of

land overlying a common source of supply of oil and gas has legal privileges as

against other owners of land therein to take oil and gas therefrom by lawful

operations conducted on his own land, limited, however, by duties to other owners

not to injure the source of supply and by duties not to take an undue proportion of

the oil and gas. (emphasis added)64

Correlative rights are often relied upon by regulatory agencies and courts as

justification to limitthe number of legal wells and to limitproduction from a well

or within a pool in which extractive operations are taking place, but there is

been limited.

64Samson Resources, 702 P2d at 22.

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absolutely no judicial or statutory authority to support Appellants opinion that

correlative rights create either a right to drill or an obligation to drill in the context

of an oil or gas field that has never been developed.


land use laws prohibiting gas drilling would notbe inconsistent with the policy of

protecting correlative rights.

C. Greater Ultimate Recovery Explained; and Why A Decision By This Court

To Uphold Local Municipal Authority To Enact Land Use Laws Prohibiting

Gas Drilling WouldNotBe Inconsistent With The Policy Of Promoting

Greater Ultimate Recovery.


prohibiting gas drilling would be inconsistent with the policy of promoting

greater ultimate recovery.65


use laws prohibiting gas drilling would notbe inconsistent with the policy of

promoting greater ultimate recovery.

65E.g.,Appellants Brief at 57-58.

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Appellant in its Briefs cites no judicial or other authority defining the term greater

ultimate recovery, and cites no authority supporting Appellants opinion that

(whatever the term may mean) the policy of promoting greater ultimate recovery

will be defeated if this Court upholds local municipal authority to enact land use

laws prohibiting gas drilling.

The reason that Appellant has cited no judicial or statutory authority to support its

assertion regarding greater ultimate recovery is most likely that Appellant was

unable to find any, and it is respectfully submitted that the reason Appellant was

unable to find any such authority is that none exists.

Appellant is apparently of the opinion that the concept of promoting greater

ultimate recovery somehow requires the drilling of as many wells as possible in as

many communities as possible within as many New York municipalities as

possible. In this regard, Appellant misapprehends what greater ultimate recovery

means in the context of oil and gas.

In oil and gas parlance, a well is said to be in primary production or recovery so

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long as natural reservoir energy66is sufficient to propel the oil or gas to the well

bore. The term secondary recovery is applied to worn out fields where

production has declined or ceased because the reservoir pressure is about gone and

artificial energy (such as created by pumps) must be employed to bring the product

to the bore.67Repressuring of a well involves injection of gas into oil or gas

formations to effect greater ultimate recovery.68A flowing well is a well that

produces by its own reservoir pressure.69

All experts on oil and gas production agree that, presently, there is no way by

which all of the oil and gas in any field can be recovered. How much of the oil and

gas will be recovered from any field depends on the pressure in the field.70

66SeeWilliams & Meyers, O&G Law, definition of primary production; andManual of O&G

Terms; definition of primary production: Production from a reservoir by primary sources of

energy, that is, from natural energy in the reservoir [].

67Williams & Meyers, O&G Law 104.

6814 David J. Muchow & William A. Mogel,Energy Law and Transactions, Unit IV Glossary of

Energy Terms(2014).

69Manual of O&G Terms; definition of flowing well.

70Syverson v North Dakota State Indus. Commn., 111 NW 2d 128, 132 (ND 1961). Syverson

involved a secondary recovery operation (repressuring) where it was found necessary to

repressure the field pressure in order to secure the greatest ultimate recovery [ ] therefrom.Id.

at 131.

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Professor Ely observed that a pool is an engine: it represents an equilibrium of

rock pressure, gas pressure, and underlying water pressure. Pierced by a well,

these forces propel oil or gas or water, or all three to the surface [ ]. Under ideal

conditions, those natural underground forces, i.e., water drive, gas pressure, and

so on, may be so harnessed and controlled as to lift to the surface 90-95 percent of

the [hydrocarbons] contained in the reservoir, by flowing, over a long period of

years. But when [ ] produced without restriction, the engine figuratively races

itself to pieces.71

In the context of oil and gas production, the phrase promoting greater ultimate

recovery refers to the concept of avoiding wasteful dissipation of reservoir

energy (or pressure) with respect to aparticularwell or with respect to various

wells within aparticularpressure-connected pool, in order that the reservoir

pressure of thatparticular well, or of the various wells within thatparticular

pressure-connected pool, will remain available for use if and when efforts are

made to bring the hydrocarbons present in the particular pool to the surface (i.e.,

recovery).

71Northcutt Ely, The Conservation of Oil, 51 Harv L Rev 1209, 1219-1220 (1938).

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It is an established fact that maintenance of reservoir pressure is essential to

secure the greatest ultimate recovery of oil and gas.72

Wasteful or inefficient dissipation of reservoir energy has been found to occur in

any number of different situations, including: drilling too many wellswithin the

same pool,73overproduction of a particular well or pool,74and allowing production

to occur too rapidly.75

72Phillips Petroleum Company v Stryker, 723 So 2d 585, 588 (Ala 1998).

73See, e.g., Owen L. Anderson & Ernest E. Smith,Exploratory Unitization Under The 2004

Model Oil And Gas Conservation Act: Leveling The Playing Field, 24 J Land Resources & Envtl

L 277, 278 (2004): the drilling of too many wells inefficiently dissipated the natural reservoir

energy [ ] thereby causing underground waste. Because of this rapid dissipation of internal

reservoir pressure, hydrocarbons that would otherwise have been produced became

unrecoverable.

74See, e.g.,HECI Exploration Co. v Neel,982 SW2d 881, 884 (Tex 1998), where illegal

overproduction resulted in the permanent loss of oil and gas reserves that otherwise could have

been recovered [ ]. [] The reservoir itself was damaged because production by [ ] at excessive

rates caused oil to migrate into the gas cap overlying the reserves, which diminished the amount

of oil and gas that can be recovered.

75E.g., Uncontrolled flow of flush or semiflush wells for any considerable period exhausts an

excessive amount of pressure [] and greatly lessens ultimate recovery. Champlin Refining Co. v

Corp. Commn. of State of Okl.,286 US 210, 228 (1932); and

An engineering analysis of the reservoir-pressure data [ ] provides definite criteria against which

the efficiency of the operations can be tested.Experience has demonstrated that most sound

production practices are employed only when production rate is restricted.It follows that, if

conservation is to be achieved, the rate of production from each field must be restricted to such

an extent that efficient producing practices may be employed. (emphasis in original.)Progress

Report by the Special Study Committee and the Legal Advisory Committee on Well Spacing and

Allocation of Production of the Central Committee on Drilling and Production Practice,

Division of Production, American Petroleum Institute (published by The Committee through

private subscription, 1942), 31; and

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In contrast, there are no cases from any jurisdiction that hold that notdrilling a

well in an oil or gas field that has never been developed is somehow inconsistent

with promoting greater ultimate recovery.

There are requirements that an operator correctly plug a well (so as to avoid the

dissipation of reservoir energy that otherwise would occur if the well were left

uncapped) when it wishes to cease operations from the well for whatever reason,76

but there are no cases that require in the name of promoting greater ultimate

recovery, or otherwise that a well, once drilled, must continue to be operated

until every last molecule of oil or gas has been wrung from the ground.

Restrictionsupon drilling and production are commonly employed77in the name

Permitting wells to flow to capacity continuously resulted in waste, in that the gas pressure

would be unduly and disproportionately dissipated and used in excess of the amount required to

produce [ ] efficiently and as a result of such unrestrained operation, large quantities [ ] would be

left in the ground and unrecoverable which could be recovered by more orderly methods of

production , from Oklahoma Corp. Commn. Order 4882 dated Dec. 23, 1929, referenced at

W.P.Z. German,Legal History of Conservation of Oil and Gas in Oklahoma, 159, fromLegal

History of Conservation of Oil and Gas, A Symposium, Section of Mineral Law, American Bar

Association 1938.

76See, e.g., 17 Okl St Ann 53.

77Just what effect unrestricted production would have on the field was not shown [].

However, the restrictionin production and the retardedorderly withdrawals from the field, were

in the interest of [ ] preventing waste, and effecting a greater ultimate recovery than would be had

under unrestricted production. (emphasis added.)R.R. Commn. v Humble Oil & Ref. Co., 193

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of securing the greatest ultimate recovery.78

New Yorks statutory and regulatory schemes limitsthe number of wells that can

be drilled into an underground pool of oil or gas by creating spacing units thus

insuring maximum recovery. (emphasis added)79The application of conservation

measures necessarily results in curtailmentof production of oil, gas or bothin

order to [ ] obtain the greatest ultimate recovery from the pool. (emphasis

added.)80

No judicial or statutory authority exists to support Appellants apparent thesis that

the concept of greater ultimate recovery requires the drilling of as many wells as

possible in as many communities as possible within as many New York

municipalities as possible.

SW2d 824 (Tex Civ App 1946)affd sub nom. Williams v R.R. Commn. of Texas, 331 US 791

(1947) and affd sub nom.Humble Oil & Ref. Co. v R.R. Commn. Of Texas, 331 US 791 (1947).

78

Production at an excess rate would decrease bottom hole pressure, [] which would beunfavorable to the greatest ultimate recovery [].Johnston v Cole, 135 SW2d 524, 526 (Tex Civ

App 1940).

79Western Land Services Inc., 26 AD3d at 17.

80Denver Producing & Ref. Co. v State, 1947 OK 251, 199 Okla 171, 184 P2d 961.

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The phrase greater ultimate recovery has a very specific meaning within the

context of oil and gas production: it refers to the concept of avoiding wasteful

dissipation of reservoir energy (or pressure) with respect to aparticularwell or

with respect to various wells within aparticularpressure-connected pool, in order

that the reservoir pressure of theparticularwell, or of the various wells within the

particular pressure-connected pool, will remain available for use if and when

additional or future efforts are made to bring the hydrocarbons present in the

particular pool to the surface (which is referred to as recovery).


land use laws prohibiting gas drilling wouldnotbe inconsistent with the policy of

promoting a greater ultimate recovery.

III. Summary of Argument.

Appellant asserts that a decision by this Court to uphold local municipal authority

to enact land use laws prohibiting gas drilling would be inconsistent with the goals

of preventing waste, providing for greater ultimate recovery, and protecting

correlative rights that are among the policies which underlie enactment of the Oil,

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Gas, and Solution Mining Law.


use laws prohibiting gas drilling would notbe inconsistent with the policies of

preventing waste, protecting correlative rights, and providing for greater ultimate

recovery.

Preventing waste, protecting correlative rights, and providing for greater ultimate

recovery are terms of art in the context of the oil and gas industry.

There exists no authority to support Appellants contention that notdrilling a well

in an oil or gas field that has not been previously developed constitutes waste as

that term is used within the oil and gas industry.

As to correlative rights, that term in the context of oil and gas law means (only)

that (a) each owner of an interest in a common source of supply of oil and gas has

a legal privilege, as against the other owners, to take oil and gas by legal

operations, limited by duties to the other owners (b) not to injure the source of

supply, and (c) not to take an undue proportion of the oil and gas. An opportunity

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to produce in the context of correlative rights simply means that all landowners

within the common source of supply have no greater or lesser opportunity to

produce than the other owners of interests within that common source of supply.

Correlative rights are often relied upon by regulatory agencies and courts as

justification to limit the number of legal wells and to limitproduction from a well

or within a pool in which extractive operations are taking place, but there is

absolutely no judicial or statutory authority to support Appellants opinion that

correlative rights create either a right to drill or an obligation to drill in an oil or

gas field that has never been developed.

Appellant apparently believes that the concept of promoting greater ultimate

recovery somehow requires the drilling of as many wells as possible in as many

communities as possible within as many New York municipalities as possible.

In the context of oil and gas production, the phrase promoting greater ultimate

recovery refers to the concept of avoiding wasteful dissipation of reservoir

energy (pressure) with respect to aparticular well or with respect to various wells

within aparticularpressure-connected pool, in order that the reservoir pressure of

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thatparticularwell, or of the various wells within theparticularpressure-

connected pool, will remain available for useif and whenadditional or future

efforts are made to recover hydrocarbons from the particular pool.

There are no cases from any jurisdiction that hold thatnotdrilling a well in an oil

or gas field that has never been developed is somehow inconsistent with

promoting greater ultimate recovery.

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CONCLUSION, and REQUEST FOR RELIEF

For the reasons set forth hereinabove, we hereby respectfully submit that a

decision by this Court to uphold local municipal authority to enact land use laws

prohibiting gas drilling would notbe inconsistent with the policies of preventing

waste, protecting correlative rights, and providing for greater ultimate recovery,

and we respectfully request that this Honorable Court affirm the unanimous

decision of the Appellate Division below.

Dated: Ithaca, New York

April 18, 2014

Respectfully submitted,

_____________________________

David F. Slottje, Esq.Community Environmental DefenseCouncil, Inc.PO Box 898Ithaca NY 14851Telephone: (607) 277-5935Facsimile: (607) [email protected]

/s/

concepts of mineral correlative rights and waste and home rule

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